May 25, 2012

Chinese importers cancel soy purchases

Due to fears of more price drops that has wiped out their crushing margins, some Chinese soy importers have cancelled its soy import orders scheduled for delivery in the next few months, separate traders said Wednesday (May 23).

With margins turning negative, Chinese crushers stand to lose about RMB100 (US$15.8) on every tonne of soy they process at current prices.

CBOT soy futures fell to US$13.7/bushel Wednesday, down 10% from May 1. The import prices of soy in the domestic market has fallen to about RMB4,300/tonne (US$680) now, from about RMB4,600/tonne (US$727) at the start of the month.

This has pushed down the price of soyoil and soymeal in the domestic market, making crushing previously bought soy a loss-making proposition for most processors.

A mid-sized soy crusher in the coastal province of Shandong is likely involved in cancellations of some of the cargoes it had booked, a Shanghai-based trader said, without elaborating on the size of the cancellations.

The company booked some new cargoes of US soy at lower prices, but cancelled the Brazilian cargoes it had earlier bought at higher prices from a Japanese soy exporter, an executive at another Shandong trading house said.

A third trader in Guangdong also confirmed the crusher has cancelled some soy cargoes, after making losses on earlier shipments that were processed. The company couldn't be reached for comment immediately.

While some are choosing to outrightly cancel shipments, others may be reselling cargoes before they are shipped to China, traders said.

A Chongqing-based soy importer recently resold two cargoes of soy to other domestic firms at discounted prices, one of the trading executives said.

According to an analyst with Shanghai JC Intelligence, some Chinese corn importers have also cancelled or delayed shipments recently, although the quantity involved isn't large.